DOW Friday closing price - 15072

The DOW confirmed that a bearish Head & Shoulders formation has been built on the weekly closing chart when the stock closed in the red for a second week in a row. The formation is now in place giving the traders clearly defined parameters from which decisions can be made. A weekly close below 14810 or above 15451 will now likely generate aggressive movement in whichever direction is broken. A break below will offer a 13964 objective while a close above will likely generate a rally up to the 16000 level.

The DOW did close in the lower half of the week's trading range suggesting that further downside will be seen this coming week. Nonetheless, the index continues to move based on the Debt Ceiling issue and if some progress is made between the parties further downside may not be seen. The close on Friday was green and on the highs of the day, mostly because there was some hope things would improve over the weekend.

On a weekly closing basis, decent resistance is found at 15451 and decent to perhaps strong resistance is found at 15658. Above that level there is no resistance until the psychological resistance is reached at 16000. On a daily closing basis, resistance is minor to perhaps decent at 15409 and strong between 15658 and 15676. On a weekly closing basis, support is decent to perhaps strong at 14799/14810. On a daily closing basis, minor to decent support is found between 14960 and 14996, decent support at 14776 and decent to strong support at 14659.

The DOW continued to lead the way to the downside, having closed an additional 1.3% lower than last week's close, whereas the SPX only dropped .001% and the NAZ rose .04%. It is evident that the selling continues to be keyed on the DOW, suggesting once again that Blue Chip stocks are being targeted for liquidation.

The DOW had an inside day on Friday but a close in the green and on the high of the day, suggesting the first course of action for the week will be to the upside. With the index basically showing lower lows on 9 of the past 12 trading days and no spike rallies whatsoever, resistance to the upside is minor and likely easy to break should the traders get back into a buying mode. Very minor intra-week resistance that held on Friday is at 15083 (Friday's high). If that level is broken on Monday (likely if follow through is seen) there is no intra-week resistance until 15300 is reached. The index does show minor to perhaps decent daily close resistance at 15248 which also includes the 50 and 100 day MA's, currently at 15230 and 15245 respectively. A close above those lines would suggest further upside will be seen with 15340 or even 15542 as intra-week upside objectives.

On a negative chart note for the bulls, the 50-day MA is ready to cross below the 100-day MA, and that has not happened since the second week of December. The previous time those lines crossed it was not a big event since the DOW had been rallying for 13 days prior to the cross, the rally continued immediately thereafter, and the negative cross was negated 7 weeks later with a cross back to the upside. On this occasion the index has not been rallying and the cross is about to occur (likely this week), meaning that the bulls will need to rally the index "immediately" above the recent high at 15709 in order to get the negative cross to be negated in the same period of time. A cross of those moving averages is considered a negative sign for the index.

To the downside, the DOW shows minor support at 14880, minor to decent support at 14844, and decent support at 14760, which also includes the 200-day MA, currently at 14720. In addition, the 14776 level, on a daily closing basis, is very important since a close below that level would give a strong failure to follow through signal since the index did make a new all-time high just 3 weeks ago. In addition, any weekly close below 14810 would generate a break of the neckline of the H&S formation that would offer a 13996 downside objective.

It is evident that if the Debt Ceiling issue is not resolved by October 15th that the downside will not even be a question, it will occur and perhaps dramatically. To the upside though, resolution of the Debt Ceiling issue will not necessarily cause the DOW to make new all-time highs as resolution of the issue is not necessarily a positive catalyst, just withdrawal of a negative.

Trading the DOW this week continues to be a "what if" scenario, meaning that chart trading within the trading range mentioned above can be seen but will have little meaning.

NASDAQ Friday closing price - 3807

In spite of the general weakness being seen in the market, the NASDAQ continued its uptrend having generated the 5th 13-year intra-week and green weekly close high in a row. In addition, the index also generated a reversal week having gone below the previous week's low and then closing above the previous week's high, suggesting that a minor correction has been seen prior to further upside occurring.

The NASDAQ is likely to continue to outperform all other indexes if the debt ceiling issue is resolved as the index continues to gain momentum to the upside, much like in 1999 just prior to the dot.com run in which the index ran from 2978 to 5132 over a period of 5 months from October 1999 to March 2000.

On a weekly closing basis, there is no resistance found until old resistance (year 2000) is found at 3860. Above that level, decent to perhaps strong resistance is found between 4234 and 4252. On a daily closing basis, there is very minor resistance at 3817 and then nothing for the past 12 months. On a weekly closing basis, support is very minor at 3689 and decent at 3589. On a daily closing basis, support is minor at 3774 and a bit stronger at 3761. Further minor support is found at 3715 and at 3692, very minor at 3654, minor at 3600 and decent at 3578/3579.

For the past 14 trading days, the NASDAQ has rallied .08% having seen a close at 3781 on September 16th and a close on Friday at 3807. Nonetheless, during the same period of time the DOW has fallen 2.5% (15451 to 15072) and the SPX has fallen 1.2% (1709 to 1690), likely meaning that the traders are hedging their bets with the NASDAQ versus the other indexes. For the next 2 weeks while the debt ceiling issue remains in question this setting will continue, making the index stocks unattractive short-sellers versus any other stocks.

The NASDAQ has no resistance above until 3860 is reached and even then that resistance is old (from 2000) and only on a weekly closing basis. On an intra-week basis, that is little to stop the index from getting up to the 4000-4289 level if the market rallies. To the downside, the NASDAQ generated a low on Monday at 3734 that represents pivotal support as no other support until minor support at 3700 is found. No decent support is found until 3600 is reached.

The NASDAQ did show a fair amount of volatility this past week suggesting that something of consequence is about to be seen, either to the downside or the upside. Having generated a positive reversal week, the 3734 level become a support level of importance as a break of that level this coming week would not only be a break of support but a failure to follow event as the chart action suggests the index should go higher.

It is evident that the Debt Ceiling issue will likely be the determining factor, but the probabilities do favor the parties agreeing to it before the deadline, meaning that the NASDAQ could see a run of consequence to the upside even if the other indexes do not react in the same positive manner.

SPX Friday closing price - 1690

The SPX continues to be the mediator in the fight between the indexes as an ominous double top on the weekly closing chart is shown (negative) but no sell signal has yet been given (positive). The index ended up the week only 1 point lower than the previous week, suggesting the traders are awaiting further news before deciding what direction to take.

The SPX did follow through to the downside, off of last week's close on the lows of the week, but the late rally on Friday did cause the index to close near the highs of the week, suggesting further upside above last week's high at 1696 will be seen this coming week. If that occurs, it will set up the following week, the deadline for the Debt Ceiling issue, as a week of decision.

On a weekly closing basis, there is strong resistance at 1709. Above that level there is no resistance. On a daily closing basis, there is minor but likely indicative resistance at 1695, minor resistance at 1698, decent at 1709 and strong at 1725. On a weekly closing basis, support is minor at 1667, minor to decent at 1632 and decent at 1592. On a daily closing basis, support is minor at 1678 and again at. 1685. Below that, there is minor resistance at 1667 and at 1650, minor once more at 1642 and decent at 1630.

The SPX did get down this past week to a very pivotal chart level between 1671 (low between 7/16 and 8/14) and 1669 (previous all-time high daily close from May) with a drop on Thursday to 1670. The bulls were able to hold that level, meaning that the traders are still waiting for further information before making any kind of a decision of importance.

The SPX did close near the highs of the week and on the highs of day on Friday and further upside is likely to be seen at the beginning of the week with resistance found at 1696/1698, at 1709, and at the all-time intra-week high at 1729. The probabilities strongly favor a rally up to the 1709 level if things remain the same as they were last week. If there is more of a chance of the parties agreeing to the debt ceiling then a rally up near 1729 could be seen, and if there is less of a chance of an agreement, then the 1696/1698 level should stop the rally.

With the SPX being the mediator, the traders will be watching closely as a break below 1670 or a rally above 1729 will be an important sign of what is to come.

The Debt Ceiling issue likely remains the only catalyst for the next 10 days. Failure to agree will bring about a strong move down, while an agreement will "likely" bring about a strong up move. Discussions between the parties continue but are still unresolved as of today (Sunday). By the same token, a resolution of the Debt Ceiling does not guarantee "a strong move up" as it is not a solution for the economy, just a prevention of a catastrophe. In addition, it has been said the Fed did not begin the tapering of the Stimulus Program last month in anticipation that the Debt Ceiling problem would intensify. Nonetheless, should the issue get resolved, the probabilities do favor that some type of tapering would be announced at the next FOMC meeting, meaning that the bulls would lose one of the reasons for the recent rally that could prevent strong buying from continuing, other than the first knee jerk reaction to the upside.

The economic calendar this coming week is devoid of any major report other than Retail Sales on Friday. Nonetheless, it is likely that economic news will be generally ignored at this time, at least until after October 15th (Debt Ceiling deadline).